SIDHRAMAPPA ANDANNAPPA MANVI Vs. COMMISSIONER OF INCOME TAX BOMBAY

JUDGEMENT

(1.) THE joint family, of which the assessee was at one time a member, had advanced certain loans to the Warad family. On partition of that joint family the debts due to the family came to the share of the assessee. A suit was filed by the assessee for recovery of those debts against the Warad estate but the suit was dismissed by the trial Court. There was an appeal to this Court but this Court dismissed the appeal on September 29, 1941. The question that arose for consideration by the Income-tax authorities was as to when these loans advanced by the family to the Warad estate became a bad debt. The Income-tax Officer held that the loans were not advanced in the course of the joint family business and therefore the claim of the assessee to deduct this amount as a bad debt was disallowed. The Appellate Assistant Commissioner on appeal held that the debt had become a bad debt many years prior to the year of assessment. Then there was an appeal to the Tribunal and the Tribunal held that debt had become a bad debt on September 29, 1941, when the judgment of the High Court was delivered. Now the assessment year which the Tribunal was considering was the year 1943-44 and the accounting year was Shake 1863-64 which corresponds to October 21, 1941, to November 8, 1942. The Tribunal erroneously took the view that September 29, 1941, fell within the Shake year 1863-64 when obviously it did not. On that erroneous assumption the Tribunal allowed the appeal of the assessee and permitted him to include the bad debt in the assessment year 1942-43. The Commissioner then applied to the Tribunal for rectification of its order under Section 35 and the Tribunal acceded to the application of the Commissioner and rectified the order holding that as September 29, 1941, did not fall within the assessment for the year the assessee could not claim to include this bad debt in the as sessment for the year 1942-43. On that view the Tribunal dismissed the appeal of the assessee. Then the assessee also applied to the Tribunal under Section 35, his grievance being that after the judgment of the High court he had applied to the High Court for leave to appeal to the Privy Council on January 5, 1942, and on his petition a Rule was granted by the High Court on January 7, 1942. This Rule was not prosecuted and nothing further happened to the petition filed by the assessee. According to the fact of this application for leave to appeal to the Privy Council was before the Income-tax Tribunal and this fact appeared on the record, but the Tribunal did not take this fact into consideration. As a matter of fact the Tribunal states in the statement of the case that this fact was not brought to its notice at all. The application of the assessee was that the Tribunal should rectify its order by taking into consideration this particular fact and then giving its judgment as to when the debt became a bad debt in light of the fact that the petition for leave to appeal to the Privy Council was made by the assessee on January 5, 1942. The Tribunal rejected the application of the assessee. It is on these facts that three questions have been referred to us by the Tribunal.

(2.) THE first question is with regard to the power of the Tribunal to rectify under Section 35. Mr. Kola's contention is that what the Tribunal has done is tantamount to exercising a power of review or revision and not a power of rectification. He says that that the Tribunal had at first allowed the appeal of the assessee and then purporting to act under Section 35 it has dismissed that appeal. According to him this is exercising the power of review or revision which is not conferred upon the Tribunal. It is also contended by Mr. Kola that the power of rectification can only be exercised by the Tribunal on its own motion. The Tribunal cannot exercise the power of rectification at the instance of the Commissioner. Now when we turn to Section 35 (2) the power of rectification which is conferred upon the Tribunal is the same as the power which is conferred upon the Commissioner and the Appellate Assistant Commissioner under Section 35 (1) and that power is to rectify on its own motion its own mistake appearing on the face of the record. Now it is in my opinion impossible to contend that if a Tribunal is given a power to rectify its own mistake on its own motion, that power excludes the power to rectify the same mistake at the instance of a party or when attention of the Tribunal is drawn to its mistake by a party appearing before it. The power to rectify on its own motion is a larger power than the power to rectify on the application of a party. When a statute confers a power upon a Tribunal to make an order on the application of a party that is a limited power. The power is limited to rectification on an application being made by a party. If an application is not made even if the Tribunal realises its own mistake or finds out its own mistake it has no power to correct it. But when a statute confers a power upon a Tribunal to rectify a mistake suo motu that power is a wider power, a larger power, and can be exercise without an application being made by any party. Therefore, when the Tribunal exercises this power on the application of the Commissioner or at the instance of the Commissioner it is doing something which it can do on its own motion and in doing the same at the instance of the Commissioner, it is exercising a narrower power than the power conferred upon it by Section 35 (2 ). Mr. Kola's grievance is that the notice served upon him under the proviso to sub-section (1) specifically mentions that the application for rectification was made at the instance of the Commissioner and he would be heard by the Tribunal. Now I do not understand how the assessee can be prejudiced by the notice being served upon him in these terms. The reason why an assessee is served with a notice when an application for rectification is made is that he should be heard before an order is made to his prejudice, that is to say, before enhancing his assessment, and so long as a notice was served on the assessee and so long as the assessee was heard it does not make the slightest difference whether the notice mentions that the Tribunal was acting suo motu or whether it was acting at the instance of the Commissioner or on the application of the Commissioner.

(3.) BUT the more substantial question raised by Mr. Kola is as to the power of the Tribunal to rectify the mistake. Now the power is undoubtedly a limited power; it is not a power of revision or review, but it is limited to correcting only those mistakes which are apparent on the record. A mistake must be patent on the record; it must not be a mistake which can be discovered by a process of elucidation, or argument, or debate. The mistake being patent on the record, rectification must be limited to correcting that mistake only without any further argument or debate. The rectification must follow as a necessary logical consequence of the mistake it cannot pass an order which is contrary to the order already passed. According to him in dismissing his appeal after having allowed it what the Tribunal was doing was not rectifying a mistake but was revising or reviewing its own decision. Now it is obvious that the power of the Tribunal is not confined to mere rectification of a mistake which is patent on the record. After the mistake is corrected the consequential order must follow and the Tribunal has the power to pass all consequential orders. This is clear from the proviso itself, because the proviso contemplates that in correcting or rectifying the error and in passing the consequential orders prejudice may be caused to the assessee by his assessment being enhanced. In such cases the law requires a notice to be served upon the assessee under Section 35. In this case the result of the rectification of the error was that the Tribunal had to pass an order to the prejudice of the assessee. The result of the rectification was that the assessment was enhanced and because of that notice had to be served upon the assessee which in fact was served. Our attention has been drawn to the judgment of the Madras High Court in O. Rm. M. Sm. Sv. Sevugan v. Commissioner of Income-tax, Madras. In that case the Madras High Court was not considering at all what was the effect of the order under Section 35. It is true that they did say that Section 35 had a limited application and it does not enable an order to be reversed, revised, or reviewed, but permits only such error which is on the face of the record to be corrected. With respect that position in law is indisputable. But the real decision was that when an order is made under Section 35 it does not lend itself to a reference under Section 66 (1 ). It was held that inasmuch as an order under Section 35 is not an order in revision or review of the original order under Section 33 (4) no reference is competent under Section 66 (1), because the order under Section 35 is a new order not order in revision or review under Section 33 (4 ). We express no opinion as to whether this is correct view or not, but in any case it does not in any way help us to construe an order made under Section 35 so as to decide what is the effect of an order under Section 35. Therefore, in our opinion, the Tribunal was perfectly competent in rectifying the mistake made by it under Section 35 (1), and having rectified it, it was equally competent to pass consequential order which was that the appeal was to be dismissed and not to be allowed.